How Payday Lenders Can Create Financial Woes for you Instead of Solving Them?

Many people often think that their present financial problems can be solved by visiting the payday lenders for an advance loan payable on their next payday. This is also known as soft loan but a closer analysis of the whole arrangement shows that it is not soft after all. All payday loans are often accompanied by high interest rates that are payable within the agreed payment date when the borrower gets his or her pay.

Indeed, the borrowers can enjoy a short-term reprieve as they can get the cash to cover their immediate needs but the consequences that follow often have long term impacts on the individuals involved.

When Borrowers Fail to Pay

Obtaining a payday loan is not that easy as different people believe it to be. The payday lenders often access the banking details of the borrowers such that they can readily get their dues when the payday of the later arrives. However, some borrowers often fail to meet their obligations to repay their loans as agreed since the amount borrowed plus interest should be paid in lump sum. This means that part of the amount is paid and the remaining balance continues to attract interest.

At times, the borrower is left with very little money such that he or she is forced to borrow again from the same payday lender. This often creates a vicious cycle of debt that can trap you for a very long period such that it can be very difficult to disentangle yourself from this predicament. At the end of the day, the borrowers will be working to repay the loan than planning meaningful things that can improve their welfare.

Bank Loans Versus Payday Lenders

A bank loan from a registered financial lender can be advisable in time of need especially to the employees who are creditworthy. At least, reasonable annual interest rates are charged for the loans that have been accessed from banks compared to the exorbitant rates charged by the payday lenders. This alternative is worth trying since it can cushion the cash strapped individuals at different periods while giving them a flexible repayment plan that does not worsen their already dire situation. Payday loans can be good but care should be taken to avoid creating more problems instead of solving the problem already existing.

Truth in Lending Act

We display maximum APR, calculated consistently with the Truth in Lending Act (TILA) -The TILA regulations can be found at 12 CFR Part 1026. The description of which charges are included and excluded from the calculation of “Finance Charge” is found in Section 1026.4. The APR calculation for “Open-End Credit” is found in Section 1026.14, The APR calculation for “Closed-End Credit” is found in Section 1026.22